The economics of the film industry are changing | Hacker News Reader

The economics of the film industry are changing

economist.com

54 pointsdenzil_correa27 comments

This article is kind of disappointing.

> Between 2007 and 2011, pre-tax profits of the five studios controlled by large media conglomerates (Disney, Universal, Paramount, Twentieth Century Fox and Warner Bros) fell by around 40%, says Benjamin Swinburne of Morgan Stanley.

Mass-market luxury industry takes hit during largest recession since Great Depression. News at 11.

>In 2011 American cinemas sold 1.28 billion tickets, the smallest number since 1995. Last year, ticket sales rose back to 1.36 billion and box-office revenues to a record $10.8 billion

So the year over year volatility is in the single digits and following the economic recovery they're back to making record profits.

It seems like the only point the article makes is that that TV is doing better than film right now. But that isn't "movies are doomed," just "TV is doing really well."

>A move from analogue to digital film enabled perfectionist directors to shoot more takes and touch them up afterward, using up expensive production and editing time. Studios have also started to make more “tent pole” films: big releases that can support the bottom line like a pole holds up a tent. These typically rely on expensive special effects, rather than compelling scripts, to attract a global audience.

Jevon's effect in action. The thing is, that's not actually a problem: If you're making more profit from doing that than it costs to do it, it's sustainable. If you're not, why are you doing it? Stop it and go back to creating a larger number of less expensive films based on compelling scripts rather than special effects. It seems to be what people are asking for anyway. You can't simultaneously expect to be taken seriously in complaining that what you're doing isn't working and refuse to change what you're doing.

They keep talking about John Carter as a failure. I saw it. It wasn't great. And the reason wasn't bad acting or bad special effects, it was that it had a mediocre script. So yeah, try hiring some better writers next time. They apparently cost less than special effects anyway.

>Between 2006 and 2012, the six big studios also cut the number of films they made by 14-54%, according to Nomura.

And then they wonder why they're not doing as well as they want to.

>And they started to pay actors and directors far less.

It's about time. Hard to find sympathy for "we're not making enough money" when you're still paying eight figure compensation to individuals.

"They keep talking about John Carter as a failure. I saw it. It wasn't great. And the reason wasn't bad acting or bad special effects, it was that it had a mediocre script. So yeah, try hiring some better writers next time. They apparently cost less than special effects anyway. "

I saw it too, and thought it was decent. It failed because of the title. Even the most hardcore sci-fi fans don't know what John Carter is.

If the title had "Mars" in it it probably would have at least broken even.

>I saw it too, and thought it was decent. It failed because of the title.

It failed because it was "decent" rather than "great" and it cost too much to make to not be great and attract enormous numbers of theater goers. That's half the problem: They place these huge bets on single films and then if one of them doesn't work out they're in big trouble and you see everyone whining and crying about it. They need to learn to make a larger number of smaller bets that each have a higher risk individually but a lower risk collectively, because then a single failure doesn't cost you a hundred million dollars.

John Carter was doomed before it was released. All the reviews doomed it. I even read a critical article on the WSJ. With all the bad press and the amount of money spent to make the film, I decided to see it anyway. I must say that I've seen far worse movies and I found it to be quite entertaining.

A book that "details every blunder and betrayal that led to the doom of the motion picture - and that left countless Hollywood careers in the wreckage" was written titled John Carter and the Gods of Hollywood - http://www.amazon.com/John-Carter-Gods-Hollywood-ebook/dp/B0....

Just remember that only a handful of actors get paid six-figure salaries.

"Hi, I'm a professional actor. Can I take your order?"

film-going in America is not a growth business, especially now that people have so many media to distract them at home. The share of Americans who attend a cinema at least once a month declined from 30% in 2000 to 10% in 2011.

You can get both a really good 60-inch plasma (or a good 1080p projector!) and a solid surround system for well under $1500 these days (even five years ago, that might've got you just a crappy 42-inch LCD).

At least for me, that's really lowered the appeal of going to a theater, even if I'm pretty geeked about something. Add in the instant gratification of Apple TV/Netflix, and I just don't see people going to theaters in five years (when this level of quality has trickled down and even the $1500 tier will be even more opulent). Kind of like when video arcades couldn't offer anything that much more technically impressive than the current generation of consoles.

I agree. The only advantage the theater has now is the release date. Torrents have mostly taken care of that advantage for those who know where to look.

Those who know where to look, and are willing to do something illegal.

I changed how I think think about movies after talking with a marketing rep at a studio. Imagine you were launching a new software startup every single week, and all the brand equity you built up before resets to zero each time. All of a sudden you'd throw out any film purist sense about you and be looking for tricks to prevent this, namely sequels, marketing on stars or director reputation, etc.

It's even worse than that. Jon Rogers has an excellent summary of the problem space:

Movie executives do not lead happy lives. If you are an executive, this is your day: a scruffy man in a Hawaiian shirt walks into your office and says, "I need you to be personally responsible for giving me one hundred million dollars so I can go to Ireland and have people who pretend for a living act like they're fighting imaginary dragons."

"Will I get to see the dragons first?" you ask hopefully.

"Oh, no the dragons won't exist until after we're done shooting. The professional pretending people will be yelling at sticks. Occasionally, they will flee from a mop."

And your job, as the exec, is to write him the check.

http://kfmonkey.blogspot.co.uk/2005/02/writing-adaptation-pt...

That's a really good point I hadn't considered...with production costs easily breaking $100m, lots of the bigger fundraising news doesn't even reach this. Color for example raised ~$40m, which in movie terms isn't even a small romantic comedy. The Lord of the Rings trilogy had a budget of $281 million and in many ways was a big of a gamble as any Venture Backed Company.

I'd imagine that the methods to raise that kind of budget aren't all that dissimilar in truth.

"The Lord of the Rings trilogy had a budget of $281 million and in many ways was a big of a gamble as any Venture Backed Company."

Not really. Lord of the Rings was an established brand before the movies with a fervent fan base.

I don't think that's a good analogy. Film studios don't make films: directors and producers do.

If you want a more accurate analogy, there are places that fund a load of startups in a similar way to studios... ;-)

Film studios don't make films: directors and producers do.

The general public has, in general, no clue about how the movie industry actually works. That extends to random HN commenters.

In this case, though, you're right.

That's pretty much the videogames industry.

Or is it? At least, for videogames you can reuse big chunks of game engines and various networking code. You can't reuse footage that easily.

That's more akin to reusing props and cameras.

I have a great Blu-ray player at home, but it's unused owing to the ridiculous prices of the media. Sure the detail is great, but it's got to compete with Netflix for home viewing. In addition, Netflix allows me pause and watch this anywhere on my Nexus 4/7.

A Blu-ray copy of John Carter is equivalent to 2 months Netflix subscription, or 3 months in Blu-ray 3D.

Could have watched John Carter 3D in the cinema (ignoring the poor reviews) only to realize I'd never watch it a second time at home in Blu-ray. 1 month's Cineworld subscription is the same cost the Blu-ray 3D.

Not to mention the anti-consumer nature of blu-ray and dvd these days: the unskippable commercials, trailers and anti-piracy warnings? These are also not present on Netflix. Some commercials are present in some content on Hulu Plus. But even that is far, far less than what you have to deal with when renting or buying a retail disc.

To say nothing about new releases trying to push people into 3D prints that were rarely good (let alone worthwhile), more-often sloppy and always carried the negatives of eye-strain, dimness, unnecessary cost, etc. [1]

Which is all just to say that the economics of film are changing because film-going and retail discs have been continually decreasing their value proposition while their digital alternatives have been continually increasing theirs.

[1] Not letting people BYOGlasses is absurd. Even if theatres allowed it, most film-goers would inevitably forget and just buy them anyway. They're really only punishing families with that kind of policy. Families who already have plenty of good reasons to ignore the theatre.

Or you could rent it at a local Redbox Or stream from vudu.com or a bunch of other places.

My wife finds movies, especially action movies, too loud at the theater. So we don't go anymore.

I use earplugs in movies, maybe they change the frequency spectrum (cut off more in high frequencies), but I not so much of a purist to mind.

Just a heads up, you can buy a pair of frequency-neutral earplugs for about $10-$15. They reduce the volume without giving the sound that "underwater" quality. The only downside is that they aren't disposable, so you might need to wash them with a damp paper towel between uses.

Hollywood is famous for playing so fast and loose with tax-loopholes that I just can't trust any of the numbers quoted. Practically every Hollywood blockbuster loses money on paper when it comes time to pay taxes, so you have to wonder if they're reporting those same cooked numbers to drum up sympathy. Let's also not forget that Hollywood films are filmed all over the place to save money, and usually in places where studios are heavily subsidized. Governments see a local film industry as a cultural gem, and pay through the nose to attract productions. I find it difficult to believe that all those free-rides aren't having an impact on the bottom lines of film companies.

I met someone recently who was a photographer/editor/camera op and recently made a thousand dollars for some editing work on a commercial. The person that gave him the gig was a former partner of a now famous producer. The editor found out later that the entire budget for the commercial (the project he was working on) was $50,000.

He also found out the entire thing was filmed on an iphone and the producer pocketed the rest of the money.

For some reason the page crashes safari and chrome on iPad after loading halfway.

There is an interesting issue regarding ticket prices which the article mentions but doesn't discuss in detail. Many years ago it was affordable for a family to go to the movies every weekend. Now, ticket prices have shot up so much that its a pretty expensive habit. I wonder if a forced deflation of ticket prices could improve the situation

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